Offices scarce but housing scarcer: estimating the premium for London office conversions

Paul Cheshire and Katerina Kaimakamis

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: British planning is among the most restrictive in the world and has been restrictive for longer than elsewhere. Restrictive regulation substantially increases the costs of office space and, especially in London, increases the house prices. Partly in response to the crisis in housing supply an automatic right to convert offices to residential use was introduced in 2013. Some major office locations in central London and Manchester were excluded from this relaxation. We exploit the resulting boundary discontinuities to estimate the impact on prices of the new right to convert offices to housing. Using a panel data set of some 2,000 office transactions between 2009 and 2016, we find a significant increase in the price of offices eligible for this automatic conversion: our central estimate is a premium of 50%. This result demonstrates that London's restrictions on the supply of housing were substantially more severe than those on offices–already estimated to have been tighter than anywhere else in Europe. This article contributes to the small literature analyzing the restrictive effect of regulation on offices and is, as far as we are aware, the first analyzing regulatory restriction on offices relative to housing.

Keywords: housing supply; restrictive regulation; office markets (search for similar items in EconPapers)
JEL-codes: J01 R14 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2022-09-01
New Economics Papers: this item is included in nep-ure
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Published in Real Estate Economics, 1, September, 2022, 50(3), pp. 743 - 766. ISSN: 1080-8620

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Related works:
Journal Article: Offices scarce but housing scarcer: Estimating the premium for London office conversions (2022)
Working Paper: Offices scarce but housing scarcer: estimating the premium for London office conversions (2020)
Working Paper: Offices scarce but housing scarcer: estimating the premium for London office conversions (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:108952

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